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Digital Payments in India: A Complete Guide

Digital Payments in India

What is Digital Payment?

Digital payments are transactions that take place via digital or internet modalities, with no physical exchange of money involved. This means that both parties, the payer and the payee, use electronic media to trade money.

The Government of India has been implementing many efforts to promote and support digital payments in the country. As part of the ‘Digital India’ program, the government has the ambition to establish a ‘digitally empowered’ economy that is ‘Faceless, Paperless, Cashless’. 

There are different types and ways of digital payments. Please note that digital payments can take place on the internet as well as on physical facilities. For example, if you buy anything from Amazon and pay for it using UPI, it counts as a digital payment. Similarly, if you purchase anything from your local store and prefer to pay by UPI instead of handing over cash, it also is a digital payment.

How digital technologies will continue to improve and develop the payments sector?

The pace of digital innovation in payments is driving a reduction in expenses expected to double compound the annual growth rate. It is resulting in new business models and a more competitive environment as new companies emerge. 

  1. Contactless Payments – This digital payment option is rising in popularity due to its speed and frictionless experience. A secure payment mechanism using a debit, credit, or smart card enabled by Radiofrequency Identification (RFID) or near-field communication  (NFC). 
  2. Open Application Programming Interfaces (API) – APIs provide programmatic access to proprietary applications and online services. New suppliers can develop services by using open APIs. These techniques lower barriers to entry for new financial technology firms, supporting innovation and supporting seamless payment systems for the end-user.
  3. QR Codes – Quick Response barcodes or square-shaped codes with two dimensions convey data. As a quick and straightforward way to communicate information and minimise payment acceptance expenses, it has gained popularity. An account code is scanned with a digital gadget to complete the payment.
  4. Biometric Payments – Biometric digital payments utilise Biometric ID as a mechanism of verification and authorisation of payments. Biometric ID is any mechanism by which a person can be uniquely identified by evaluating one or more differentiating biological attributes. The physical characteristics of fingerprints, hand geometry, earlobe geometry, retina and iris patterns, voice waves, and DNA are unique identifiers.

What are the various methods of Digital Payment in India?

After the launch of Cashless India, we presently have eleven ways of digital payments in India. Other methods have been in use for more than a decade, some have become popular recently, while others are quite new.

  • Banking cards

Indians often utilise Banking cards, debit/credit cards, or prepaid cards, as an alternative to cash payments. Andhra Bank created the first credit card in India in 1981.

Cards are favoured for a variety of reasons, including their ease, portability, security, and safety. This is the only way of digital payment that is popular in online purchases and physical transactions alike. Nowadays, various applications are being released with the specific goal of managing card transactions.

  • Aadhaar Enabled Payment System (AEPS)

AEPS is a bank-led strategy for digital payments that was established to utilise the presence and reach of Aadhar. Under this method, users may utilise their Aadhaar-connected accounts to transfer money between two Aadhaar-linked Bank Accounts. As of February 2020, AEPS had crossed more than 205 million as per NPCI statistics.

AEPS doesn’t involve any physical activity like visiting a bank, using debit or credit cards, or placing a signature on a document. This bank-led solution facilitates digital payments at PoS (Point of Sale / Micro ATM) via a Business Correspondent (also known as Bank Mitra) utilising Aadhaar identification. The USPS costs for Cash withdrawal at BC Points are roughly Rs.15.

UPI is a payment mechanism that merges several bank accounts into a single application, allowing the transfer of money effortlessly between any two parties. In contrast to NEFT, RTGS, and IMPS, UPI is significantly more well-defined and standardised among banks. You may use UPI to initiate a bank transfer from anywhere in just a few clicks.

The benefit of utilising UPI is that it allows you to pay straight from your bank account, without the need to fill in the card or bank data. This approach has become one of the most popular digital payment modalities in 2020, with October having over 2 billion transactions.

  • Mobile wallets

Mobile Wallets, as the name indicates, are a sort of wallet in which you may carry cash but in a digital version. Often clients link their bank accounts or banking cards to the wallet to allow safe digital transactions. Another approach to utilising wallets is to add money to the Mobile Wallet and use the same balance to transfer money.

Nowadays, numerous banks have introduced their wallets. Additionally, major private firms have also developed their presence in the Mobile Wallet industry.

  • Internet banking

Internet Banking, often known as e-banking or online banking, allows the clients of a certain bank to make transactions and perform other financial operations via the bank’s website. E-banking requires a stable internet connection to make or receive payments and visit a bank’s website, which is termed Internet Banking.

Today, most Indian banks have started their internet banking services. It has become one of the most common forms of internet transactions. Every payment gateway in India has a virtual banking option accessible. NEFT, RTGS, or IMPS are some of the primary options to make transactions using internet banking.

  • Mobile banking

Mobile banking refers to the act of executing transactions and other banking operations using mobile devices, generally through the bank’s mobile app. Today, most banks have mobile banking applications that can be used on portable devices like mobile phones and tablets and sometimes on PCs. 

Mobile banking is recognised as the future of banking, because of its ease, convenience, and quickness. Digital payment options, such as IMPS, NEFT, RTGS, IMPS, investments, bank statements, bill payments, etc., are available on a single platform via mobile banking apps. Banks themselves urge clients to adopt digital as it makes operations easier for them too.

  • PoS terminals

PoS (Point of Sale) is recognised as the location or section where a sale happens. For a long time, PoS terminals were regarded to be the checkout counters at malls and businesses where the payment was made. The most frequent sort of PoS machine is for Debit and Credit cards, where clients may make payments by just swiping the card and entering the PIN.

With digitalisation and the rising popularity of alternative online payment methods, new PoS systems have come into the scene. First is the contactless reader of a PoS machine, which may debit any amount up to Rs. 2000 by auto-authenticating it, without the necessity of a Card PIN.

  • Bank prepaid cards

A bank prepaid card is a pre-loaded debit card issued by a bank, generally single-use or reloadable for many uses. It is distinct from a conventional debit card because the latter is always associated with your bank account and may be used several times. Depending on the prepaid bank card, this may or may not apply. A prepaid card may be generated by any client who has a KYC-complied account by easily accessing the bank’s website. Corporate gifts, reward cards, or single-use cards for giving purposes are the most prevalent applications of these cards.

  • Unstructured Supplementary Service Data (USSD)

USSD was launched for those sectors of India’s population which don’t have access to appropriate banking and internet amenities. Under USSD, mobile banking transactions are possible without an internet connection by simply calling *99# on any necessary feature phone. 

This number is active across all Telecom Service Providers (TSPs) and allows clients to avail of services such as an interbank account to account cash transfer, balance inquiries, and accessing mini statements. Around 51 top banks offer USSD service in 12 different languages, including Hindi & English.

  •  Micro ATMs

Micro ATM is a gadget for Business Correspondents (BC) to give critical banking services to consumers. These Correspondents, who may even be some local business owners, will operate as a ‘micro ATM’ to execute fast transactions. They will utilise a gadget that will enable you to transfer money via your Aadhaar-connected bank account by only confirming your fingerprint.

Essentially, Business Correspondents will operate as banks for the consumers. Customers need to authenticate their validity using UID (Aadhaar). The primary services that will be supported by micro ATMs are withdrawal, deposit, money transfer, and balance inquiry. The sole condition for Micro ATMs is that you should link your bank account to Aadhaar.

 

digital payments in India

 

What are the advantages of Digital Payments in India?

In a nation like India, where differences are sometimes poles apart, maintaining financial equality becomes a matter of fundamental significance. One of the reasons why our administration started vocalising Cashless Economy and Digital India was to enhance access to financial resources. There are several benefits that digital payments in India bring to the table.

  • Ease and convenient

One of the major advantages of digital payment is the seamless experience they deliver to customers. Reduced dependence on currency, rapid transfer speed, and the convenience of dealing make internet payments a popular choice. Traditional payment methods like cash and cheques add additional considerations like danger, steps, and physical presence. With digital payment, you may send and receive payments from anywhere in the globe with the push of a mouse.

  • Economic progress

Customers transact more online when they witness the ease, convenience, and security of online payments. This means that more and more people feel comfortable shopping online, investing digitally, and transferring money via electronic methods. The increase in money in transportation and internet business helps the progress of the economy. This is why internet ventures are being started every day and even more are making profits daily.

  • Safety and efficient tracking

Handling and dealing in cash is a laborious and tedious activity. Along with the risk of losing money, there is the trouble of carrying cash everywhere you go and keeping it safe. With digital payments, one may keep their funds secured in an online format conveniently. Nowadays, your cellphone alone is enough to make and receive payments – due to UPI, net banking, and mobile wallets. Additionally, most digital payment channels provide regular updates, notifications, and statements enabling a customer to track his funds.

  • Financial inclusion

It involves increasing access to a range of financial services, including savings accounts, credit, and insurance products. The Committee on Payments and Market Infrastructure and the World Bank published the flagship paper ‘Payment Aspects of Financial Inclusion (PAFI)’, the report examines how payment systems and services increase financial service access and use. It looks at what aspects of retail payments are important for financial inclusion, as well as how bettering payments infrastructure and services could help people get access to and use transaction accounts faster. 

Why choose SabPaisa Online Payment Gateway for digital payments?

A payment gateway acts as a link between your bank account and the platform where your transactions take place. SabPaisa is the first API-driven unified payment experience platform in the world, with India’s best payment gateway and most payment options.

We accept all major payment methods, including Debit cards, Credit cards, Wallets, UPI, Bharat QR, and others, and have one of the industry’s highest success rates.

SabPaisa Payment Gateway brings you some exclusive features:

  1. SabPaisa Payment Gateway enables maximum payment modes like Debit/ Credit /Wallet /UPI/ Bharat QR/ NACH/ RTGS/IMPS/NEFT
  2. SabPaisa brings you lightning-fast, seamless API-based integration, the PG architecture is completely micro-services driven making your integration with us one of the fastest in the industry and leading to a seamless payment experience for the users.
  3. Experience one of the highest transaction success rates in the industry.
  4. Get host-to-host connectivity with top leading banks leading to the best success rates and quick payment processing due to bank host-to-host contribution.

The SabPaisa Payment Suite offers products and services ensuring payment access to every customer.

SabPaisa Payment Links

SabPaisa Payment Links is the world’s first unified link-based payment method, that allows the collection of payments using links for a wide range of payment methods.

Here’s why SabPaisa Payment Links is a seamless option:

  1. Get payment link services on a subscription-based model according to your need.
  2. Start collecting payments even without a website via easy payment links.
  3. Payment Links allows the merchant to bulk upload the customer list through excel/CSV  list to collect payments.
  4. Get password-protected and shortened payment links for payment collection.
  5. Get complete link analytics for tracing the link journey for better communication.
  6. Messaging with the payment link can be tailored according to its life cycle and desired communication. 

Subscriptions

Subscriptions is a one-of-a-kind mandate processing and payment collecting platform that allows businesses to accept recurring subscription payments via e-NACH/e-mandates from over 50 banks.

Subscriptions can help you in so many ways:

  1. SabPaisa allows subscription payments through e-NACH / e-mandates for 50+ banks to clients / customers / partners / agents 
  2. If the mandate fails, the payer will get an automatic Payment Link through SMS and Email for making an easy payment 
  3. Single platform for processing all modes of payment mandates, viz. NACH, Net Banking, debit card, credit card, UPI.

Payouts

Payouts is India’s 1st Payout Aggregator for businesses that seek to pay out to their Partners/Vendors/Customers with complete control over the transactions and a system with the easiest reconciliation and settlement.

These features are unmatched:

  1. Merchants do not need to deposit money in the aggregator’s account or a third-party wallet.
  2. Merchants can run payouts on a real-time basis and also schedule them as per their convenience.
  3. Merchants can execute the payout from their accounts.
  4. Merchants get real-time updates of all transactions.
  5. Easy API Integration gives merchants complete control over how they pay vendors, customers, and partners.

Conclusion

India has entered a new era of digital payments. Online payments are on the rise as financial awareness and accessibility emerge as paramount concerns for everyone. Now is the perfect time to adopt digital payments as a business or professional and allow your clients to safely transact online.

Payments made through digital means should be made ethically and protect the end-users interests. To safeguard the confidentiality and security of client information, we recommend taking precautions to ensure that digital payments are secure and private.

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